Market Morning Briefing - INTEREST RATES

Market Morning Briefing - INTEREST RATES

18 July 2014, 09:45
Damiano Fabiański
0
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"Safe haven" flows into German and US Bonds. "Risk aversion" is in the air.
German 10Yr Bund Yield (1.15%) now well below 1.20%, can trend lower. The Germany-Japan 10Yr Spread (0.62%) is also trading well below important trendline support and could head further down towards 0.50%. Not good for Euro (1.3525).

Very sharp decline in US Yields overnight. The 30Yr (3.28%) now trades below a very important support trendline, and at the low point seen on 29th May. The 10Yr (2.47%) and 5Yr (1.64%) are still trading above Support trendlines. Need to see whether there is a bounce from these levels today, especially for the 30Yr. Else, lower levels can follow.

But, the 2Yr Swap Cost (0.1953%) continues to trend higher. Lots of demand for Floating-to-Fixed Swaps.

Today will be the test for Indian Bonds. Will FIIs exit the market to buy US Bonds? Or will high yields attract funds? The 10Yr GOI-US Spread (6.23%) continues to have Resistance at 6.25-6.50% and can open lower today on account of the dip in US yields overnight.
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